THE Department of Transportation (DoTr) is gearing up for arbitration after Light Rail Manila Corp. (LRMC), the private operator of Light Rail Transit Line 1 (LRT-1), was not granted a fare hike, an undersecretary said on Wednesday.

“Considering the current environment, with inflation na tumataas ang lahat ng bilihin ng tao, hindi talaga natin tinitingnan sa ngayon ang pagtataas ng pamasahe (we’re not looking at raising fares given the current level of inflation, with prices of many goods rising), so we really are not able to increase or grant the requested fare increase by our concessionaire for the LRT-1,” Transportation (DoTr) Undersecretary for Railways Timothy John R. Batan said during a briefing.

“On the notice of arbitration filed, this is of course being studied by our legal department as well as the DoTr’s counsel, the Office of the Solicitor General. We will handle this according to the concession agreement,” he added.

The LRMC recently filed a request for arbitration with the International Chamber of Commerce over the company’s disputes with the DoTr and the Light Rail Transit Authority (LRTA), which issued the 32-year concession agreement (CA) for the LRT-1.

LRMC hopes to recover around P2.67 billion in compensation claims and costs resulting from delays in the implementation of fare adjustments for 2016, 2018, and 2020, Metro Pacific Investments Corp. (MPIC) said in a disclosure to the stock exchange.

The partners in LRMC are Metro Pacific Light Rail Corp. with a 55% stake, Ayala group’s AC Infrastructure Holdings Corp. with 35% stake, and Macquarie Infrastructure Holdings (Philippines), Inc. with 10% stake.

“The request pertains to the adjustment of the approved fare for the years 2016, 2018 and 2020 and LRMC’s claims for compensation relating to the grantors’ contractual obligations to compensate LRMC for the difference between the stipulated fare and the approved fare based on the schedule provided in the CA, following the grantors’ inaction on LRMC’s application for fare adjustments based on the CA,” MPIC said.

The request also covers “the losses, costs and expenses incurred by LRMC for the grantors’ failure to deliver to LRMC the required number of light rail vehicles that meet the stipulated technical requirements under the CA and the structural defects on the existing LRT-1 system, both of which are required to ensure that LRMC is able to provide a safe, efficient and reliable service to the public as required under the CA.”

The company also said that “despite compliance with applicable legal requirements and after exerting best efforts to amicably discuss the foregoing claims with the grantors, LRMC has not received any offer from the DoTr and LRTA.”

The settlement of such claims is “critical” to enable LRMC to continue to be “viable and provide safe, efficient and reliable services to the public,” the MPIC noted.

“Notwithstanding the dispute, LRMC remains committed to providing the best possible services to the public. In fact, despite the non-performance by the grantors of their obligations and the non-payment of LRMC’s claims, LRMC has implemented significant operational improvements, rehabilitation projects, and system upgrades to the existing system and continued the construction of the Cavite Extension safely and efficiently,” it added.

MPIC’s partner in LRMC, Ayala Corp., has expressed an intention to divest. MPIC said it is considering increasing its stake, but that its decision would depend on the next government’s plans for LRT-1.

MPIC is one of three Philippine subsidiaries of Hong Kong’s First Pacific Co. Ltd., the others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., maintains an interest in BusinessWorld through the Philippine Star Group, which it controls. — Arjay L. Balinbin